Other‐customer failure : Effects of perceived employee effort and compensation on complainer and non‐complainer service evaluations

Purpose – The purpose of this paper is to explore how the organizational recovery response to other‐customer failure influences the affected customer's level of satisfaction, unfavorable word‐of‐mouth (WOM), and repurchase intentions toward the firm. Design/methodology/approach – Two experimental studies: 2 (complaint versus no complaint)×3 (employee effort (EE): high versus low versus no)×2 (compensation versus no compensation) were used to test the research hypotheses in a restaurant context. Findings – In cases of other‐customer failure, the outcome valence (failure discontinues versus continues) influences how complainants and non‐complainants rate their perceptions of satisfaction and subsequent behavioral intentions toward the firm. Customers who perceive that there has been good EE made to help solve the problem of other‐customer failure give higher service evaluations than those who perceive little or no EE. Additionally, there are insignificant differences in the rating of satisfaction, repurchase intention, or negative WOM from customers in the latter group. Offering compensation is not a cure‐all. It has the strongest effect on non‐complainants in the low EE scenario. Practical implications – Service managers need to design well‐balanced organizational recovery systems in terms of the outcome of recovery (i.e. compensation) and the way in which the recovery process is delivered (i.e. EE) to the affected customers in response to other‐customer failures. Since the influence of compensation on service evaluations is largely dependent on customer perceptions of employee‐effort, providing employees with the appropriate problem‐solving skills for working with both problem‐causing customers and the problem‐affected customers is a key issue for service marketers in cases of other‐customer failure. Originality/value – The paper examines the importance of the as yet under‐researched issue of how organizational recovery responses to other‐customer failure influence a customer's service evaluations of the firm.